LONG-SIGHTED PRINCIPAL AND MYOPIC AGENTS

We consider a long-lived principal, who can accumulate capital, and fa ces a sequence of myopic agents. For instance, a farsighted manager fl oats the shares of his firm on a myopic stock market, or a social secu rity institution must propose contracts that are acceptable by the cur rent active population. In these circumstances, we study the shape of the investment decision, the dynamics of accumulation, and the long-ru n steady-state. In particular, we characterize situations where the sh ort horizons of the agents have a dramatic effect and lead to the clos ure of the firm or the demise of the social security system.